Fed watchers say Mr. Bernanke and his close allies at the Board in Washington are worried by signs that the US recovery is running out of steam. The ECRI leading indicator published by the Economic Cycle Research Institutehas collapsed to a 45-week low of -5.7 in the most precipitous slide for half a century. Such a reading typically portends contraction within three months or so.

Key members of the five-man Board are quietly mulling a fresh burst of asset purchases, if necessary by pushing the Fed’s balance sheet from $2.4 trillion (£1.6 trillion) to uncharted levels of $5 trillion. But they are certain to face intense scepticism from regional hardliners. The dispute has echoes of the early 1930s when the Chicago Fed stymied rescue efforts.

In the video below, Paul Krugman talks about $8 – $10 trillion of Treasury buying. I think the sum needed to provide the stimulus the Fed wants could be higher still. Krugman doesn’t think this will happen.

"One should not expect too much from further quantitative or credit easing," said Olivier Blanchard, the chief economist of the International Monetary Fund. "It should be done but the implications for the economy will be limited."

Christina Romer, who recently stepped down as a White House economic adviser, said the Fed is in uncharted waters and it is unclear how much further easing will accomplish.

"There’s a lot of questions about quantitative easing and how it works and how communications policies work, but they need to be tried because this is still a crisis," she said.

My take: monetary policy won’t have much oomph here. Fiscal policy is better and more targeted. But, of course, fiscal policy is off the table except for a re-institution of the Bush tax cuts. So, we’ll see some serious money printing instead – probably not $10 trillion, but a lot.

Since 1985, dollar-yen has sunk nearly 70% and yet the US has the same bilateral deficit with Japan today as it had then. So why does everyone think that a Chinese revaluation will necessarily clear out any perceived imbalances? Maybe if U.S. policy encouraged thrift over asset-based consumption growth, these trade imbalances would dissipate more quickly.

It’s not all about currencies. The U.S. should focus on maintaining an adequate savings rate instead of trying to pump up asset prices to do its saving artificially.